2018 (4) TMI 1105 - AT - Service Tax

Liability of interest - reversal of excess accumulated and unutilized credit - Held that - the issue stands considered by the Hon ble Karnataka High Court in the case of Commissioner, LTU, Bangalore Vs. Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT , wherein it was held that in case the credit availed stands reversed, without utilization, no interest liability would arise - demand on interest set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availing of Cenvat credit for common input services.
2. Reversal of excess accumulated and unutilized credit.
3. Confirmation of interest in respect of the reversal of Cenvat credit.

Analysis:
1. The appellant availed Cenvat credit for common input services as per Rule 6(3)(c) of Cenvat Credit Rules, allowing utilization of 20% of the service tax on taxable output service. The Revenue did not dispute this utilization, leaving a balance in the appellant's Cenvat credit account.

2. The appellant, based on advice from auditors, reversed the excess accumulated and unutilized credit in their Cenvat account. Subsequently, the Revenue initiated proceedings for interest recovery, leading to the impugned order.

3. The core issue revolved around the confirmation of interest on the reversal of Cenvat credit. The appellant did not dispute the excess credit reversal but contested the interest imposition. The Tribunal referenced the Karnataka High Court's decision in Commissioner vs. Bill Forge Pvt. Ltd. and other High Court judgments, emphasizing that if credit availed is reversed without utilization, no interest liability arises. Citing precedents from various High Courts, including Madras and Gujarat, the Tribunal concluded that non-reversal of accumulated credit before utilization does not attract interest liability.

In light of the legal precedents and the jurisdictional High Court's decision, the Tribunal set aside the impugned order confirming interest demand and penalty imposition. The appeal was allowed, providing consequential relief to the appellants, and the miscellaneous appeal was disposed of accordingly.